SoftBank takes on Amazon by investing $2.5 billion in Flipkart

NEW DELHI/MUMBAI: With the announcement of its $2.5 billion investment in Flipkart earlier this week, SoftBank Group has begun to stitch together an iron curtain against Jeff Bezos’ Amazon.

The investment in India’s top ecommerce company was put together at a lightning speed by the Tokyo-based technology-to-telecom conglomerate, barely two weeks after it failed to push through a sale of its portfolio company Snapdeal to Flipkart. It is being seen as a strategy to not only capture significant stakes in India’s largest Internet companies, but also take Amazon head on in the world fastest growing digital economy.

SoftBank has already committed more than $4 billion to India’s startup ecosystem in 2017, doubling what it had invested in the country since 2014. Having invested in Paytm, Flipkart, Ola and Hike Messenger, it now has stakes spread across the payments, ecommerce, ride-sharing and social messenger segments.

But it is the investments in Paytm and Flipkart, announced within three months of each other in 2017, that potentially give SoftBank the strongest ammunition to take on the American online giant.

“I don’t think anybody is going to be able to kill Amazon. Amazon is here to stay. It’s a question of finding the right players to take on Amazon, in the right categories, in the respective countries as well,” said Vinod Murali, managing partner of venture debt firm Alteria Capital Advisors.

The latest investment, which will see Flipkart’s cash reserves cross $4 billion, will allow the Bengaluru-headquartered online retail firm to create a deeper moat as it continues to stave off stiff competition from Amazon, which has also pulled out all stops to grab the pole position in India’s discount-fuelled, highly attritional ecommerce industry.

Bezos has pledged to continue ploughing capital into its Indian unit, which has made significant gains over the past four years in Asia’s third-largest economy.

Last month, ET reported that the Seattle-based online retail behemoth had crossed $2 billion in India investments, as it infused another Rs 1,680 crore in its main local unit, Amazon Seller Services, taking the total capital invested to over Rs 13,800 crore.

SoftBank’s investment in Paytm can also be seen as a counter to Amazon, which launched payments entity Amazon Pay earlier this year. In July, Amazon Corporate Holdings and Amazon.com invested Rs 130 crore in fresh capital in the Amazon Pay India, which will directly compete with Paytm. “They (SoftBank) are looking at acquiring as much market share as possible in India. They are using a multipronged approach through the leaders in all these segments,” said Vikram Gupta, managing partner of venture capital firm IvyCap Ventures.

With an investment strategy that will see SoftBank invest from its balance sheet as well as its mega, technologyfocused Vision Fund, industry experts believe that the Masayoshi Sonled company will also look to strike deals in sectors such as logistics, healthcare and education.

“If I look at education and healthcare, you have to take bets well ahead of performance. Those are the two sectors that I would keenly watch out for and see what Softbank does. It is a matter of time,” Murali said. A faction of investors also believe that for a consumption-led economy like India, SoftBank will want a big piece in all those sectors that contribute significantly to the economy.

“Everybody has to take this market seriously because the one asset we have is the enormity of the population. “That’s what they are investing behind. So all sectors that are large in the GDP potential and everything that is massive in consumption, including education, healthcare, etc is up for grabs,” said Sandeep murthy, Partner at venture capital firm Lightbox Ventures.

SoftBank is also believed to be on the hunt for an executive to scout for and manage investments in India. That is a move it has till date shied away from, preferring to manage the portfolio from Tokyo, San Francisco and Singapore. An announcement on that front is expected soon.